How some of Trump's policies might affect the economy

One article is on tariffs and the other is on taxes.

First, see What Trump’s New Tariff Threats Mean for the U.S. Economy: If president-elect follows through, consumers and businesses are likely to see prices rise on everything from fresh fruit to electronics by Justin Lahart, Chao Deng and Rachel Wolfe of The WSJ. Excerpts:

"On Tuesday, economists at the Budget Lab at Yale reworked their estimates of how tariffs under Trump might affect the economy. 

Tariffs of 25% on Canada and Mexico, and 10 percentage points added to existing tariffs on China, with those countries imposing retaliatory tariffs, would raise U.S. consumer prices by 0.75% next year, according to the Budget Lab. That estimate drops to 0.65% if households substitute purchases toward domestically produced or lower-tariff imported options. That would amount to more than $1000 in lost purchasing power per household, in 2023 dollars.

If the tariffs against Chinese goods were layered on top of the 60% Trump has already threatened, versus existing tariffs, the estimated inflationary effect would be higher. Beyond raising the prices that Americans pay for goods, higher inflation could lead the Federal Reserve to cut interest rates less than expected in the year ahead. That would keep rates on credit card balances and other loans higher than they otherwise might have been."

"Tariffs can create winners and losers. Domestic industries that compete with lower-cost foreign manufacturers can experience greater demand for their products, while the government takes in additional revenues.

But consumers and other purchasers of imported goods aren’t able to buy as much, and both economic theory and the historical record show that they tend to lose more than the winners gain. Moreover, when a country imposes tariffs against another country, the other country often responds with tariffs of its own."

"American consumers will feel price increases not only after the tariffs are imposed but also in the run up, as stores and businesses rush to preorder nonperishable goods, said Kimberly Clausing, an economist at UCLA School of Law. Lumber from Canada is an example of how that would play out.

“If I were a lumber yard, I’d be placing big orders today. Those extra orders will drive up prices,” said Clausing. Among the ripple effects of lumber prices will be high bills for American households planning home renovations."

Employment in agriculture would be hard hit, too, according to the analysis, coming in 3.1% below where it would have otherwise been. Employment in durable manufacturing—the building of cars and other long-lasting goods—would be 5.4% lower.

Automakers, in particular, might be at risk. They have become reliant on a network of factories and parts suppliers that span the U.S., Mexico and Canada since the North American Free Trade Agreement came into effect 30 years ago, followed by its successor, the United States-Mexico-Canada Agreement.

Tariffs of 25% on imports from Mexico and Canada could add $3,000 on average to the price of a car, according to analysts at Wolfe Research. The firm estimates that about $97 billion worth of auto parts are imported to the U.S. from the two countries each year, and four million vehicles are shipped in—about three million from Mexico and one million from Canada."

Then see Why Some Tax Cuts Can Be Better Than Others: Biggest potential payoffs for economic growth come from creating incentives for businesses to make new investments by Richard Rubin of The WSJ.  Excerpts:

"economists say many of the individual tax cuts being contemplated would do little to expand investment, gross domestic product or tax collections. And they caution against banking on growth fueled by tax cuts to address the nation’s fiscal challenges. 

In particular, they say, extending the lower individual tax rates that expire after 2025—by far the largest component of any likely tax bill and the one that directly affects the most voters—would put more money in consumers’ pockets without driving a meaningful change in the economy’s long-run trajectory."

"keeping individual tax rates in place is unlikely to change most people’s decisions about whether and how much to work."  

"“We shouldn’t expect a very large economic impact relative to the size of the tax cut,” said Kyle Pomerleau of the conservative-leaning American Enterprise Institute. “Republicans are mostly just changing the taxation of labor compensation, wages and salaries, and for a lot of workers, we’re just not that responsive to changes in our after-tax wage rate.”"

"continuing the higher standard deduction, removing taxes on tips or keeping the individual tax bracket structure, wouldn’t necessarily boost economic growth. Instead, the tax cuts with the biggest potential payoff, according to economists across the political spectrum, are the ones that create incentives for businesses to make new investments that require additional workers and higher wages. 

The 2017 tax law included immediate tax write-offs for certain capital investments and equipment purchases, rather than requiring companies to spread those deductions across many years. That accelerated-depreciation provision, known as expensing, is gradually phasing out under the 2017 law, and lawmakers are aiming to bring it back in full—which economists say could be a good trade off for any lost revenue."

"its [the 2017 tax law] business tax cuts increased investment"